NEW ORLEANS-With an ever-increasing number of inexpensive rooms at the inn, economy and budget chains must take care to prominently position themselves in their segments and beware of brand proliferation, attendees at the Economy Lodging Conference were told.

Nearly everyone predicts the economy lodging sector is poised for growth that will make it the most popular niche in the hospitality industry.

"The economy and midrange segments are one-two in growth and demand," said Randy Smith, president of Smith Travel Research, Hendersonville, Tenn.

At the end of May, there were 17,000 properties with 1.3 million rooms in the economy and budget categories, and Mr. Smith said the segment's supply level is keeping up with the demand.

But the different economy chains must market themselves into that position plus beware of offering so many brands.

Inside meeting rooms, one theme was last year's warning of overbuilding from Mike Leven, then president of Holiday Inn Worldwide and now new owner of Microtel.

But the room gain is rather insignificant due to older hotels going out of the market and at the same time being replaced by new ones of similar size. Owners also are positioning new products to untapped markets.

Because hotels do so much cross selling now-and the theory among their franchisees is that it creates consumer confusion-they were also advised to position brands to different and more narrow niches in the budget/economy segment. Rodeway Inns is doing that now by creating senior rooms and marketing itself to senior citizens. Days Inn is also positioning itself more narrowly by marketing to families, and Howard Johnson's to kids.

And this year the economy segment increased marketing spending by 9.4%. However, hotel marketers don't exclusively go the multimedia route for ad campaigns.

"We have only $500,000 to spend," said John Buttolph, president of Showlodge, franchiser of Shoney's Inns. "That has to take care of the directories, a few radio ads in Atlanta and some regional print ads in USA Today."

Hotel chains are addressing their marketing problems after realizing they have to market to consumers as well as to the travel agents and wholesalers. Campaigns will be used for brand separation, designed to alleviate confusion caused by brand proliferation and cross selling.

At yearend, Choice Hotels International will drop its Friendship Inn brand from properties that don't convert to another Choice brand. That will leave Choice with six brands, including MainStay, the company's new extended-stay brand that will be unveiled in January.

Choice also will begin advertising its brands separately.

Chains say they are actually receiving more pressure from their franchisees than consumers to come up with marketing campaigns to separate brands.

One franchisee addressing the problem said that when he pays to become a certain brand and upgrades to get that flag, he wants to feel the consumer knows the difference between a Holiday Inn and a Holiday Inn Select.

"If I'm confused, think about the traveling public," said H.P. Rama, president of JHM Enterprises.

Holiday Inn Worldwide is expected to announce a new marketing campaign at its systems conference in San Antonio this month. The effort will make certain Crowne Plaza and Holiday Inn Select, plus the chain's other brands, are differentiated in all ads.

The ads, from Young & Rubicam, New York, are the first marketing effort from John Sweetwood, Holiday's new VP-worldwide marketing.

Days Inn President John Russell said companies need to think more about educating franchisees on the importance of marketing.

"Franchisees don't understand it on a local basis, they aren't sophisticated in that way and don't visualize a reason for marketing," he said.

Mr. Rama said chains could spend marketing money, part of which are marketing fees paid by franchisees, more intelligently.

"Some hotels just collect funds but don't spend the money on brands or site specific hotels," he said.

Mr. Rama said Days Inn gives franchisees $1 million to use for regional marketing and that is over and above what Days Inn spends for the brand nationally.

"It could be $5 million, but at least they are doing that," said Mr. Rama.

Mr. Russell said Days Inn will use more direct mail aimed at past customers. "We would like to do more TV, but we don't want to market to someone who isn't our customer," he said.

To celebrate Days Inn's 25th birthday, the company this summer sent birthday cards to its database of 50 million guests. The brand's new tagline complements the Days Inn sunburst logo: "Follow the sun from dusk to dawn." The campaign, from North Castle Partners, Stamford, Conn., begins next month.

"We were out for a big bang for our buck" with the birthday mailing, said Mr. Russell.

Mr. Russell said Days Inn is also looking at interstate highways for more outdoor board advertising.

"Part of the problem is that this is a very traditional industry," said Mr. Landry. "We fry an egg and make a bed just about the same way we have for 50 years."